Slow construction causes steel build up

With construction already in its annual seasonal slump, sales of construction steel have fallen even further than usual and stockpiles have reached a near-record of about 600,000 tonnes, according to the Viet Nam Steel Association.

The association blamed rising prices and the Government’s austerity measures taken to curb the inflation for the slowdown in construction and steel demand. Among the items of public spending target first for cutbacks were State budget-funded construction works deemed inessential.

Tighter credit policies for enterprises in non-manufacturing sectors were also hurting the construction industry, the association said.

The sales manager for a steel company who asked to remain anonymous said that his company’s inventory stood at about 700 tonnes, a potential disaster in the context of skyrocketing interest rates and a drastic slowdown in new construction.

The company would have no choice but to wash out inventories at discounted prices, causing it to eat huge losses, he said.

Steel companies pay an average of VND200-300,000 in interest costs on each tonne of finished steel products each month, according to the association, many members of which now face monthly interest costs of VND120-180 billion (US$5.7- 8.6 million).

Many steel companies were scrambling to find foreign markets for export, it said.

Meanwhile, the Ministry of Industry and Trade has urged enterprises to draw up suitable production plans while maintaining proper stockpile indices. In the first seven months of this year, the stockpile index of the manufacturing and production sector rose by 16 per cent against the same period last year, according to the General Statistics Office. — VNS

Tags: Vietnam steel industry, Vietnam steel market, Vietnam steel prices